Travel insurance seems like a good idea, but does it really make financial sense? On the one hand, who wouldn't want peace of mind if you get grievously injured while you're on the road, or if your bags are swallowed up into the checked-luggage conveyor belt and never reemerge, or if your airline shuts its doors? But on the other, insurance in general is a losing proposition for the majority of people who purchase it, and travel insurance in particular is rife with exclusions. So if you really want travel insurance, be on your guard.
What is travel insurance?
Travel insurance is a short-term policy where you pay a fee in exchange for the insurance company's promise to pay out in case of specific travel-related expenses. For small costs like a delay, you will probably be asked to pay out-of-pocket and get reimbursed. For large costs like medical expenses, the insurer might step in and pay directly -- it varies by policy.
Unlike car insurance, home insurance, and the like, you usually buy travel insurance for just one trip rather than making ongoing payments; like other types of insurance, though, most people lose money on it. Insurance companies stay afloat because people pay more in premiums than they get back in claims, so go into this with the understanding that statistically, you won't recoup your loss. The reason to get any type of insurance is that you're willing to lose a little bit of money, because the risk of losing a lot of money would be catastrophic.
There are two main types of travel insurance:
- International insurance, which typically covers medical expenses and is more expensive.
- Domestic insurance, which typically doesn't cover medical expenses and is therefore cheaper.
Within those, there are varying levels of coverage. Most policies cover...
The annoying stuff:
- Lost, stolen, delayed or damaged baggage
- Trip cancellation or interruption for a covered reason
- Missed flight connection due to airline schedule or delays due to weather
The really bad stuff:
- Medical emergency coverage or evacuation
- Repatriation of remains or overseas funeral expenses
- Return of a minor
- Accidental death or dismemberment
- You can also purchase additional insurance for:
- Pre-existing conditions
- Your hotel or airline going belly up
- Risky sports like skiing
- Travel to high-risk countries
Where to get travel insurance
Get it free
The easiest place to look for free travel insurance is your credit card. Here's a brief breakdown of the various cards' insurance policies:
|Travel/Emergency Assistance||Provides resources, but does not pay for expenses||Yes; covers medical expenses, evacuation and emergency travel up to $25k||Provides resources, but does not pay for expenses||Provides resources, but does not pay for expenses|
|Travel Accident Insurance||Up to $250k||Up to $1 million||Up to $500k||Up to $500k (flight insurance only)
Available for all cardholders
|Trip Cancellation Insurance||No||Up to cost of trip||Available for purchase||Up to cost of trip|
|Travel Delay Insurance||No||No||Available for purchase||$150/day|
|Lost Luggage Reimbursement||Up to $3k per trip||No||Available for purchase||Up to $2,500 per trip|
|Delayed Baggage Insurance||No||Up to $300||Available for purchase||$500
*Available for all cardholders
|Rental car insurance||Yes||Yes||Yes||Primary|
Of course, the gimmicks and gotchas, maximum claims and time limit for filing vary greatly by card. We take an in-depth look at rental car insurance as well.
Get it cheap
Groups and programs can often get you affiliate discounts or reimburse your travel insurance:
- Organizations like USAA, AAA, and the AARP offer discounted insurance
- Students on study abroad sometimes receive travel insurance as part of the school's package.
- Employees on business travel might be able to take advantage of a corporate travel insurance account.
Get it anywhere you can
You can typically buy travel insurance from an agent, but watch out for the upsell -- many travel agents are paid on commission. They'll try to scare you into buying coverage you don't need. Moreover, if the travel company goes belly up, you may lose your money. Instead, check out online comparison sites like:
Do you really need travel insurance?
Travel insurance is often redundant, meaning that you may already have many aspects covered by car, health, or life insurance. Here are just a few examples:
- Your health insurer might cover international visits. The Blue Cross Blue Shield PPO plan, for one, has a worldwide network of doctors. However, Medicare usually doesn't cover international visits.
- Many high-end credit cards offer purchase protection and will give you a refund if an item is stolen within a certain time period, say 90 days from the date of purchase.
- Your primary auto insurance may also cover rental car insurance.
There are also myriad exclusions and limitations on travel insurance. Here are just a few examples of some policies' gotchas:
- Stolen baggage isn't covered if you've been "negligent" with your belongings, and negligence is in the eye of the beholder
- Your company might not cover you if you've had even one drink
- Mental health is often excluded
- Pre-existing conditions might not be covered; failure to declare pre-existing conditions might invalidate your policy
- You know what doesn't count as a covered reason for trip cancellation? Violent crackdowns on protests and civil unrests. (What, me hold a grudge against Air France? Never.)
Generally speaking, travel insurance is usually not a good idea, especially if you're hale and hearty and can survive the hit of not being able to go on a trip. If you're worried about your family if the worst happens, consider term life insurance rather than travel life insurance -- you're statistically more likely to die in a car than on a plane. Moreover, you might have the most necessary parts of travel insurance already, through your credit card or existing insurance policies; don't pay extra to double up.
Anisha Sekar is the chief consumer advocate at NerdWallet, a website that provides expert advice on life insurance, budget traveling, taxes and more.
Abbie Redmon has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.